South Korea's chief financial regulator on Thursday called on insurance companies to restructure their assets and liabilities while bolstering their capital base ahead of the introduction of tougher global accounting standards for insurers.

Under the new rules, set to begin in 2022, insurers' liabilities will be assessed on the basis of their market value rather than book value. This is aimed at enabling a fairer assessment of insurers' ability to withstand stress and to have a larger capital base and reserves to cover potential losses.

Financial Services Commission Chairman Eun Sung-soo said the new rule will be a pain for insurance firms, but it is a task that cannot be delayed anymore. 

The commission has encouraged local insurers to gradually increase their capital base.

He said insurance companies bear a financial burden over sales of ill-devised insurance products such as indemnity medical insurance, or reimbursement-backed private medical insurance.

Analysts have warned that some insurers may face recapitalization pressure if the new accounting rules are adopted.

The change of global accounting rules comes at a time when the local insurance industry is struggling with lackluster growth as demand for insurance policies has fallen amid low interest rates and a slowing economy.

In 2018, local insurance firms saw their combined net profit decline 7.4 percent to 7.27 trillion won ($6.2 billion). (Yonhap)